Burger Consumption on the Rise
July 11/Falls Church, Va./Associated Press Financial Wire -- With a drive-through seemingly on every corner, you might think the market for burgers long ago reached saturation. However, the fastest-growing restaurant chain in America last year was Five Guys, which specializes in double-pattied behemoths the size of a softball.
That is just the tip of the arugula. So-called "better burger" joints are one of the fastest-growing parts the restaurant industry. Celebrity chef Bobby Flay launched Bobby's Burger Palace in the Northeast. Elevation Burger is expanding into Kuwait. Mooyah Burgers & Fries, Meatheads and the Shake Shack are looking to expand.
Higher-grade beef, fresher or more creative toppings, and better buns are bringing customers in the door.
The Washington, D.C., area has emerged as fertile ground for ground chuck. Five Guys, the earliest success story, is based in Lorton, Va., Elevation Burger in Arlington, BGR-The Burger Joint in Lansdowne.
Ray's Hell Burger, also in Arlington, is not a chain, but the restaurant run by iconoclastic chef Michael Landrum earned a national profile with President Barack Obama taking Vice President Joe Biden and Russian President Dmitry Medvedev there last month. (Medvedev's review: "Not quite healthy, but it's very tasty.")
It is a market that has room to grow. Such chains represent only about 2% of the $65 billion burger market, said Darren Tristano, executive vice president of Chicago-based restaurant consultant Technomic.
"The traditional players McDonald's, Burger King and Wendy's have really shifted their focus away from burgers to breakfast, chicken and beverages," said Tristano. He predicts better burger chains will continue to have double-digit sales growth for at least the next few years.
The founder of Denver-based Smashburger, fast-food industry veteran Tom Ryan, was keenly aware that Americans were hungry for higher-quality fast-food burgers.
The company did extensive research with fast-food customers who reported that the burgers they ate were mostly a matter of convenience. "'It's not the burger I crave; it's the burger I use,'" Ryan said. Smashburger has expanded to 70 stores in 15 states in just three years.
Customers are willing to pay to ease that craving. A Five Guys burger runs anywhere from $4-6, and some charge more.
Five Guys, like others, sells the fact that its burgers are never frozen the stores do not even have freezers, only coolers. Elevation Burger uses organic, grass-fed beef and sells fries cooked in olive oil. BGR uses a mix of dry-aged beef.
Despite recent success of better burgers, one of the oldest names in the business has fallen on hard times. Fuddrucker's filed for bankruptcy protection in April. Tristano said he thinks Fuddrucker's problems resulted from large restaurants with high real estate costs.
By contrast, most of the successful better-burger operators locate in low-cost strip malls. It can cost less than $500,000 to open most better-burger franchises, a third of a McDonald's or Burger King.
Mark Bucher, the founder and vice chairman of BGR The Burger Joint, said he sees room to expand slowly. He plans to keep BGR in the Mid-Atlantic region for now. Bucher says he has been through this before, as a major player in the bagel boom of the 1990s, which eventually lost steam.
"The gourmet burger industry will be survival of the fittest," Bucher said. "Those companies that are getting into the business now are five years too late."
Five Guys' sizzling expansion had a long prep time.
"It isn't anything we wanted to do. We just kind of got pulled that way" after would-be franchisees continually pitched the concept, founder Jerry Murrell said. He opened his first store in 1986, and through 2001, the company expanded to just five locations one for each of Murrell's five sons.
Murrell didn't think Five Guys' cooking lent itself to easy replication. The potatoes were flown in fresh but often had slightly different starch contents that required tweaks in cooking times. Burger patties are always hand-formed.
After expanding regionally for a few years, the company began a national expansion two years ago. In 2009, sales jumped 50% to $453 million, making it the fastest-growing restaurant with sales over $200 million, according to Technomic.
From the July 12, 2010, Prepared Foods' Daily News
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